Does energy storage provide a profitable second life for electric vehicle batteries?

Electric vehicles (EVs) are increasingly being seen as part of the solution to address environmental issues related to fossil fuel use. At the forefront of the EV revolution is China where EV sales have witnessed a dramatic increase. A direct consequence of a larger number of EVs on the roads is the growth in retired batteries once they have reached the end of their useful life inside an EV. This increasing stockpile of retired batteries raises the question of whether and how they can be disposed of, reused, repurposed or recycled. In this paper we investigate under which circumstances the use of second life batteries in stationary energy storage systems in China can be profitable using an operational optimization model. Our results show that an EV battery could achieve a second life value of 785 CNY/kWh (116 USD/kWh) if it is purchased with a remaining capacity of 80% and being abandoned when the capacity reaches 50%. Profit margins for energy storage firms are reduced if the acquisition costs of second life batteries are considered. The price range for second life batteries is assumed to range between a lower limit of the ‘Willing to sell’ price from the perspective of EV owners and an upper limit being the ‘Market evaluation’ price based on battery condition and the market price for a new EV battery. It's found that when the remaining capacity in retirement is below 87%, the application of retired battery energy storage can achieve pareto improvement from the perspective of social welfare. In addition, it's estimated that the optimal remaining capacity in retirement would be 77%. Our results suggest that EV adoption rates can be improved if a second life market can be successfully established.